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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 2002
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From to
--------- --------
Commission File Number 1-10545
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TRANSATLANTIC HOLDINGS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3355897
- ---------------------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
80 Pine Street, New York, New York 10005
- ---------------------------------------- -------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 770-2000
-------------------------
NONE
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of September 30, 2002 52,306,424
-------------------
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
PART I - FINANCIAL INFORMATION
PAGE
----
ITEM 1. Financial Statements:
Consolidated Balance Sheets as of September 30, 2002 (unaudited)
and December 31, 2001................................................... 1
Consolidated Statements of Operations for the three and nine months
ended September 30, 2002 and 2001 (unaudited)........................... 2
Condensed Consolidated Statements of Cash Flows for the nine months
ended September 30, 2002 and 2001 (unaudited)........................... 3
Consolidated Statements of Comprehensive Income (Loss) for the three and
nine months ended September 30, 2002 and 2001 (unaudited)............... 4
Notes to Condensed Consolidated Financial Statements (unaudited)............. 5
Cautionary Statement Regarding Forward-Looking Information........................... 10
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 11
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk................... 17
ITEM 4. Controls and Procedures...................................................... 18
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K............................................. 19
Signatures........................................................................... 19
Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002............. 20
Part I - Item 1
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of September 30, 2002 and December 31, 2001
(Unaudited)
2002 2001
----------- -----------
ASSETS (in thousands, except share data)
Investments and cash:
Fixed maturities available for sale, at market value (amortized cost:
2002-$3,953,435; 2001-$3,550,914) (fixed maturities pledged, at market
value: 2002-$354,067; 2001-$385,542) $4,175,160 $3,653,941
Equities:
Common stocks available for sale, at market value (cost:
2002-$489,993; 2001-$496,407) (common stocks pledged, at market
value: 2002-$6,611; 2001-$37,239) 420,053 512,631
Nonredeemable preferred stocks available for sale, at market value
(cost: 2002-$28,436; 2001-$30,589) 27,708 30,050
Other invested assets 593,896 248,275
Short-term investment of funds received under securities loan agreements 367,657 432,758
Short-term investments, at cost which approximates market value 10,973 2,562
Cash and cash equivalents 134,062 124,214
---------- ----------
Total investments and cash 5,729,509 5,004,431
Accrued investment income 77,455 66,850
Premium balances receivable, net 422,723 379,778
Reinsurance recoverable on paid and unpaid losses and loss adjustment expenses:
Affiliates 228,932 253,919
Other 597,619 620,519
Deferred acquisition costs 124,698 101,146
Prepaid reinsurance premiums 74,580 51,226
Federal income tax recoverable 16,549 43,178
Deferred income taxes 158,425 184,982
Other assets 20,428 35,274
---------- ----------
Total assets $7,450,918 $6,741,303
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Unpaid losses and loss adjustment expenses $3,897,701 $3,747,583
Unearned premiums 684,491 553,734
Reinsurance balances payable 131,534 84,815
Payable under securities loan agreements 367,657 432,758
Payable for securities in course of settlement 299,726 32,341
Other liabilities 29,289 44,062
---------- ----------
Total liabilities 5,410,398 4,895,293
---------- ----------
Preferred Stock, $1.00 par value; shares authorized: 5,000,000 - -
Common Stock, $1.00 par value; shares authorized: 100,000,000;
shares issued: 2002-53,170,624; 2001-53,119,945 53,171 53,120
Additional paid-in capital 190,987 189,243
Accumulated other comprehensive income 59,985 27,603
Retained earnings 1,750,820 1,590,487
Treasury Stock, at cost; 864,200 shares of common stock (14,443) (14,443)
---------- ----------
Total stockholders' equity 2,040,520 1,846,010
---------- ----------
Total liabilities and stockholders' equity $7,450,918 $6,741,303
========== ==========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
- 1 -
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
-------- --------- ---------- --------------
(in thousands, except per share data)
Revenues:
Net premiums written $687,207 $ 520,017 $1,842,788 $1,426,595
Increase in net unearned premiums (49,861) (40,722) (97,611) (79,355)
-------- --------- ---------- ----------
Net premiums earned 637,346 479,295 1,745,177 1,347,240
Net investment income 63,476 60,345 189,862 179,878
Realized net capital gains 1,915 2,716 369 7,848
-------- --------- ---------- ----------
702,737 542,356 1,935,408 1,534,966
-------- --------- ---------- ----------
Expenses:
Net losses and loss adjustment expenses 458,092 543,473 1,256,909 1,188,939
Net commissions 165,973 131,102 440,453 349,695
Other operating expenses 13,818 13,087 40,720 38,817
Increase in deferred acquisition costs (11,938) (8,810) (23,552) (17,314)
-------- --------- ---------- ----------
625,945 678,852 1,714,530 1,560,137
-------- --------- ---------- ----------
Operating income (loss) 76,792 (136,496) 220,878 (25,171)
Other (deductions) income (260) 96 (223) 13
-------- --------- ---------- ----------
Income (loss) before income taxes 76,532 (136,400) 220,655 (25,158)
Income taxes (benefits) 15,261 (58,570) 44,952 (37,590)
-------- --------- ---------- ----------
Net income (loss) $ 61,271 ($77,830) $ 175,703 $ 12,432
======== ========= ========== ==========
Net income (loss) per common share:
Basic $1.17 ($1.49) $3.36 $0.24
Diluted 1.16 (1.49) 3.33 0.24
Dividends per common share 0.100 0.096 0.296 0.282
Weighted average common shares outstanding:
Basic 52,305 52,262 52,289 52,217
Diluted 52,725 52,262 52,781 52,714
The accompanying notes are an integral part of the condensed consolidated
financial statements.
- 2 -
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2002 and 2001
(Unaudited)
2002 2001
----------- ---------
(in thousands)
Net cash provided by operating activities $ 435,745 $ 167,508
----------- ---------
Cash flows from investing activities:
Proceeds of fixed maturities available for sale sold 822,772 284,861
Proceeds of fixed maturities available for sale redeemed or matured 282,602 160,480
Proceeds of equities sold 476,862 596,714
Purchase of fixed maturities available for sale (1,404,736) (589,138)
Purchase of equities (522,785) (620,414)
Net (purchase) sale of other invested assets (344,281) 37,678
Net sale (purchase) of short-term investment of funds
received under securities loan agreements 65,101 (477,140)
Net (purchase) sale of short-term investments (8,339) 19,985
Change in payable for securities in course of settlement 267,385 (53,326)
Other, net 14,875 (3,412)
----------- ---------
Net cash used in investing activities (350,544) (643,712)
----------- ---------
Cash flows from financing activities:
Net funds (disbursed) received under securities loan agreements (65,101) 477,140
Dividends to stockholders (15,270) (14,415)
Proceeds from common stock issued 1,795 2,873
Acquisition of treasury stock - (4,443)
Other (1,739) (3,732)
----------- ---------
Net cash (used in) provided by financing activities (80,315) 457,423
----------- ---------
Effect of exchange rate changes on cash and cash equivalents 4,962 449
----------- ---------
Change in cash and cash equivalents 9,848 (18,332)
Cash and cash equivalents, beginning of period 124,214 129,246
----------- ---------
Cash and cash equivalents, end of period $ 134,062 $ 110,914
=========== =========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
- 3 -
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
-------- -------- -------- --------
(in thousands)
Net income (loss) $ 61,271 ($77,830) $175,703 $ 12,432
-------- -------- -------- --------
Other comprehensive income:
Net unrealized appreciation (depreciation) of investments:
Net unrealized holding gains (losses) arising during period 70,183 11,332 33,005 (7,562)
Related income tax effect (24,564) (3,966) (11,552) 2,647
Reclassification adjustment for gains included in net income (1,915) (2,716) (369) (7,848)
Related income tax effect 670 951 129 2,747
-------- -------- -------- --------
44,374 5,601 21,213 (10,016)
-------- -------- -------- --------
Net unrealized currency translation (loss) gain (17,710) (794) 16,902 (15,505)
Related income tax effect 6,199 277 (5,733) 5,426
-------- -------- -------- --------
(11,511) (517) 11,169 (10,079)
-------- -------- -------- --------
Cumulative effect of an accounting change, net of
related income tax effect - - - 32,406
-------- -------- -------- --------
Other comprehensive income 32,863 5,084 32,382 12,311
-------- -------- -------- --------
Comprehensive income (loss) $ 94,134 ($72,746) $208,085 $ 24,743
========= ======== ======== ========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
- 4 -
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Unaudited)
1. General
The condensed consolidated financial statements are unaudited, but have
been prepared on the basis of accounting principles generally accepted in the
United States of America and, in the opinion of management, reflect all
adjustments (consisting of normal accruals) necessary for a fair presentation of
results for such periods. The results of operations and cash flows for any
interim period are not necessarily indicative of results for the full year.
These financial statements include the accounts of Transatlantic Holdings, Inc.
and its subsidiaries (collectively, TRH). All material intercompany accounts and
transactions have been eliminated. Certain reclassifications have been made to
conform the prior year's presentation with 2002.
For further information, refer to the Transatlantic Holdings, Inc. Form
10-K filing for the year ended December 31, 2001 and Form 10-Q filings for the
first two quarters of 2002.
2. Net Income (Loss) Per Common Share
Net income (loss) per common share for the periods presented has been
computed below based upon weighted average common shares outstanding.
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
------- -------- -------- -------
(in thousands, except per share data)
Net income (loss) (numerator) $61,271 ($77,830) $175,703 $12,432
======= ======== ======== =======
Weighted average common shares outstanding
used in the computation of net income (loss) per share:
Average shares issued 53,169 53,078 53,153 53,023
Less: Average shares in treasury 864 816 864 806
------- -------- -------- -------
Average outstanding shares - basic (denominator) 52,305 52,262 52,289 52,217
Average potential shares, principally stock options (a) 420 - 492 497
------- -------- -------- -------
Average outstanding shares - diluted (denominator) 52,725 52,262 52,781 52,714
======= ======== ======== =======
Net income (loss) per common share:
Basic $1.17 ($1.49) $3.36 $0.24
Diluted (a) 1.16 (1.49) 3.33 0.24
(a) As the impact of potential shares for the three months ended September 30,
2001 is antidilutive (i.e., reduces the loss per common share) because
there is a loss from continuing operations, potential shares are not
included in the diluted net loss per common share calculation for that
period.
- 5 -
3. Impact of September 11, 2001 Terrorist Attacks on the United States
Results for each of the three and nine month periods ended September 30,
2001 include pre-tax net losses and loss adjustment expenses of $200 million,
representing gross incurred losses and loss adjustment expenses of $414
million less related reinsurance ceded of $214 million, from the September
11th terrorist attacks, or $130 million after tax.
4. Reinsurance
Premiums written and earned and losses and loss adjustment expenses
incurred were comprised of the following:
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
--------- --------- ---------- ----------
(in thousands)
Gross premiums written $ 830,929 $616,990 $2,184,683 $1,706,145
Reinsurance ceded (143,722) (96,973) (341,895) (279,550)
--------- --------- ---------- ----------
Net premiums written $ 687,207 $520,017 $1,842,788 $1,426,595
========= ========= ========== ==========
Gross premiums earned $ 767,649 $577,849 $2,063,718 $1,600,807
Reinsurance ceded (130,303) (98,554) (318,541) (253,567)
--------- --------- ---------- ----------
Net premiums earned $ 637,346 $479,295 $1,745,177 $1,347,240
========= ========= ========== ==========
Gross incurred losses and
loss adjustment expenses $ 457,499 $ 791,676 $1,366,254 $1,539,769
Reinsurance ceded 593 (248,203) (109,345) (350,830)
--------- --------- ---------- ----------
Net losses and loss
adjustment expenses $ 458,092 $ 543,473 $1,256,909 $1,188,939
========= ========= ========== ==========
5. Cash Dividends
During the third quarter of 2002, the Board of Directors of Transatlantic
Holdings, Inc. declared a dividend of $0.10 per common share, or approximately
$5,200,000 in the aggregate.
- 6 -
6. Income Taxes
Tax expense recorded in each of the three and nine month periods ended
September 30, 2001 reflects the full tax benefit resulting from the $200 million
of losses and loss adjustment expenses from the September 11th attacks, or $70
million. Principally as a result of the impact of the aforementioned unusual
item, tax benefits of ($58.6) million and ($37.6) million were recorded in the
Statements of Operations for the three and nine month periods ending September
30, 2001, respectively.
In addition, income taxes (refunded) paid, net, in the third quarter
totaled ($887,000) and $411,000 in 2002 and 2001, respectively. For the 2002 and
2001 nine month periods, income taxes paid, net, totaled $8,880,000 and
$27,918,000, respectively.
7. Segment Information
The following tables present a summary of comparative financial data by
segment:
International
-----------------------
Domestic Europe(3) Other Consolidated
--------- --------- ---------- ------------
(in thousands)
Three Months Ended September 30, 2002:
Net premiums written $ 382,845 $ 225,808 $78,554 $ 687,207
Net premiums earned 357,247 216,935 63,164 637,346
Net investment income 45,553 14,961 2,962 63,476
Revenues(1)(2) 404,689 231,988 66,060 702,737
Net losses and loss adjustment expenses 247,794 171,642 38,656 458,092
Underwriting expenses(4) 107,826 48,331 23,634 179,791
Adjusted underwriting profit(5) 7,223 161 4,017 11,401
Income before income taxes(1) 54,543 15,326 6,663 76,532
Three Months Ended September 30, 2001:
Net premiums written $ 292,847 $ 180,220 $46,950 $ 520,017
Net premiums earned 265,559 169,101 44,635 479,295
Net investment income 44,834 12,642 2,869 60,345
Revenues(1)(2) 313,217 181,743 47,396 542,356
Net losses and loss adjustment expenses(6) 288,873 226,074 28,526 543,473
Underwriting expenses(4) 83,551 43,260 17,378 144,189
Adjusted underwriting loss(5)(6) (101,144) (97,584) (829) (199,557)
(Loss) income before income taxes(1)(6) (53,647) (84,813) 2,060 (136,400)
- 7 -
7. Segment Information (continued)
International
------------------------
Domestic Europe(3) Other Consolidated
---------- ----------- ---------- ------------
(in thousands)
Nine Months Ended September 30, 2002:
Net premiums written $1,005,026 $ 629,786 $207,976 $1,842,788
Net premiums earned 954,986 610,665 179,526 1,745,177
Net investment income 138,609 42,533 8,720 189,862
Revenues(1)(2) 1,094,299 653,307 187,802 1,935,408
Net losses and loss adjustment expenses 646,545 478,848 131,516 1,256,909
Underwriting expenses(4) 281,890 135,461 63,822 481,173
Adjusted underwriting profit (loss)(5) 38,493 2,276 (10,122) 30,647
Income (loss) before income taxes(1) 176,789 45,364 (1,498) 220,655
Nine Months Ended September 30, 2001:
Net premiums written $ 761,397 $ 514,884 $150,314 $1,426,595
Net premiums earned 708,058 497,681 141,501 1,347,240
Net investment income 134,840 36,583 8,455 179,878
Revenues(1)(2) 851,580 534,121 149,265 1,534,966
Net losses and loss adjustment expenses(6) 603,276 478,708 106,955 1,188,939
Underwriting expenses(4) 215,991 117,048 55,473 388,512
Adjusted underwriting loss(5)(6) (100,278) (93,366) (19,253) (212,897)
Income (loss) before income taxes(1)(6) 42,733 (56,452) (11,439) (25,158)
- --------------
(1) Domestic revenues and income (loss) before income taxes include realized
net capital gains of $1,889 and $2,824 for the three months ended September
30, 2002 and 2001, respectively, and $704 and $8,682 for the nine months
ended September 30, 2002 and 2001, respectively. Realized net capital gains
(losses) for other segments in each of the periods presented is not
material.
(2) Net revenues from affiliates approximate $87,000 and $39,000 for the three
months ended September 30, 2002 and 2001, respectively, and $199,000 and
$96,000 for the nine months ended September 30, 2002 and 2001,
respectively, and are included primarily in Domestic and
International-Europe revenues.
(3) Includes revenues from the London, England office of $141,494 and $107,908
for the three months ended September 30, 2002 and 2001, respectively, and
$390,520 and $315,853 for the nine months ended September 30, 2002 and
2001, respectively.
(4) Underwriting expenses represent the sum of net commissions and other
operating expenses.
(5) Adjusted underwriting profit (loss) represents net premiums earned less net
losses and loss adjustment expenses and underwriting expenses, plus (minus)
the increase (decrease) in deferred acquisition costs.
(6) Results for each of the three and nine month periods ended September 30,
2001 include pre-tax net losses and loss adjustment expenses of $200
million (representing $100 million from Domestic operations and $100
million from International-Europe operations) from the September 11th
terrorist attacks.
8. Other Invested Assets
Other invested assets includes $411.2 million and $95.2 million as of
September 30, 2002 and December 31, 2001, respectively, representing the market
value of an investment in a limited duration bond fund managed by a subsidiary
of American International Group, Inc. (AIG).
- 8 -
9. Adoption of Statement of Financial Accounting Standards (SFAS) No. 133 and
Change in Classification of Certain Fixed Maturities
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," issued by the Financial Accounting Standards Board (FASB) in June
1998, as amended, established accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. In accordance with the standard, TRH
adopted its provisions on January 1, 2001 with no resulting effect on net income
or cash flows.
In accordance with the transition provisions of SFAS No. 133, as amended,
TRH transferred during the first quarter of 2001 all of its fixed maturities in
the held-to-maturity classification (with an amortized cost of $932.3 million
and market value of $982.1 million at the date of transfer) to the fixed
maturities available-for-sale classification (on the balance sheet) to enhance
TRH's flexibility with respect to future portfolio management. The resulting
increase in unrealized appreciation of investments, net of income taxes (a
component of accumulated other comprehensive income), of $32.4 million (net of a
tax effect of $17.4 million) has been recorded as the cumulative effect of an
accounting change in the Consolidated Statement of Comprehensive Income for the
nine months ended September 30, 2001. Under the provisions of SFAS No. 133, such
a transfer does not affect TRH's intent nor its ability to hold fixed maturities
acquired in the future to their maturity.
- 9 -
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q and other publicly available
documents may include, and Transatlantic Holdings, Inc. and its subsidiaries
(collectively, TRH) officers and representatives may from time to time make,
statements which may constitute "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. These statements are
not historical facts but instead represent only TRH's belief regarding future
events and financial performance, many of which, by their nature, are inherently
uncertain and outside of TRH's control. These statements may address, among
other things, TRH's strategy and expectations for growth, product development,
government and industry regulatory actions, market conditions, financial results
and reserves, as well as the expected impact on TRH of natural and man-made
(e.g., terrorist attacks) catastrophic events and political, economic, legal and
social conditions. It is possible that TRH's actual results, financial condition
and expected outcomes may differ, possibly materially, from those anticipated in
these forward-looking statements. Important factors that could cause TRH's
actual results to differ, possibly materially, from those discussed in the
specific forward-looking statements may include, but are not limited to,
uncertainties relating to economic conditions and cyclical industry conditions,
credit quality, government and regulatory policies, volatile and unpredictable
developments (including natural and man-made catastrophes), the legal
environment, the reserving process, the competitive environment in which TRH
operates, interest rate and foreign currency exchange rate fluctuations, and the
uncertainties inherent in international operations, and are further discussed
throughout Management's Discussion and Analysis of Financial Condition and
Results of Operations. TRH is not under any obligation to (and expressly
disclaims any such obligations to) update or alter any forward-looking
statement, whether written or oral, that may be made from time to time, whether
as a result of new information, future events or otherwise.
- 10 -
Part I - Item 2
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SEPTEMBER 30, 2002
OPERATIONAL REVIEW
RESULTS OF OPERATIONS. The following table presents net premiums written,
net premiums earned and net investment income for the periods indicated:
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------- ---------------------------------
2002 2001 Change 2002 2001 Change
-------------------------------- ---------------------------------
(dollars in millions)
Net premiums written $687.2 $520.0 32.2% $1,842.8 $1,426.6 29.2%
Net premiums earned 637.3 479.3 33.0 1,745.2 1,347.2 29.5
Net investment income 63.5 60.3 5.2 189.9 179.9 5.6
Net premiums written for the third quarter and first nine months of 2002
significantly exceeded the comparable 2001 periods principally as a result of
increases in both domestic and international treaty business. Significant
domestic treaty net premiums written growth in the third quarter of 2002
compared to the third quarter of 2001 occurred in specialty casualty
(principally directors' and officers' liability, professional liability and
medical malpractice), automobile liability and property lines. The increase in
third quarter 2002 versus third quarter 2001 international treaty net premiums
written (the majority of which emanated from the London office and Latin
American Division) was primarily caused by significant increases in property,
automobile liability and ocean marine and aviation lines. With respect to
comparative nine month net premiums written, significant domestic increases in
the 2002 period compared to the same prior year period occurred in specialty
casualty (principally directors' and officers' liability, professional liability
and medical malpractice), automobile liability, property and general casualty
lines. Significant increases in international business occurred in automobile
liability, property, medical malpractice and other professional liability lines
principally from the London office, Trans Re Zurich and the Latin American
Division. Increases in net premiums written in the 2002 periods as compared to
the same prior year periods resulted from significant rate increases and, to a
lesser extent, increased capacity provided. As premiums written are earned on a
pro-rata basis over the terms of the related coverages, the reasons for
increases in net premiums earned in 2002 over the comparable 2001 periods are
generally similar to the reasons for increases in net premiums written over
recent periods.
International business represented 45.5 percent of worldwide net premiums
written for the first nine months of 2002 compared to 46.6 percent for the
respective 2001 period. On a worldwide basis, casualty lines business
represented 78.1 percent of net premiums written for the first nine months of
2002 versus 79.5 percent in the comparable 2001 period. The balance represented
property lines.
Generally, reasons for increases in gross premiums written between years
are similar to those for net premiums written as discussed above. Ceded premiums
written for the third quarter and first nine months of 2002 increased over
comparable 2001 periods. A significant portion of the increases resulted from
the increased cost of catastrophe reinsurance as well as additional coverage
purchased.
With respect to the market environment, rates, terms and conditions are
improving in virtually all classes that Transatlantic Holdings, Inc. and its
subsidiaries (collectively, TRH) underwrites worldwide, continuing the trend of
generally increasing rate levels experienced over at least the last year.
Nevertheless, the reinsurance marketplace worldwide remains competitive, with
significant additional capital having entered the market, and TRH cannot
predict, with any reasonable certainty, future market conditions.
- 11 -
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION - CONT'D
SEPTEMBER 30, 2002
The increases in net investment income for the third quarter and first nine
months of 2002 versus the comparable 2001 periods were generally due to the
investment of significant positive operating cash flow generated in recent
periods and, to a lesser extent, to the impact of the weakening U.S. dollar
compared to certain currencies in which TRH's net investment income is earned,
offset, in part, by declining investment yields, particularly from the fixed
maturity portfolio, and by increased investment balances towards the end of the
third quarter of 2002 in a limited duration liquid investment (i.e., the limited
duration bond fund included in other invested assets) that generates a lower
yield than longer-term fixed maturities. (See discussion of cash flow and
investment activity under FINANCIAL CONDITION AND LIQUIDITY.)
The following table presents loss and loss adjustment expense ratios,
underwriting expense ratios and combined ratios for consolidated TRH, and
separately for its domestic and international components, for the periods
indicated:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2002 2001 2002 2001
------------------ -----------------
Consolidated:
Loss and loss adjustment
expense ratio 71.9 113.4 72.0 88.3
Underwriting expense ratio 26.1 27.7 26.1 27.2
Combined ratio 98.0 141.1 98.1 115.5
- -----------------------------------------------------------------------------------
Domestic:
Loss and loss adjustment
expense ratio 69.3 108.8 67.7 85.2
Underwriting expense ratio 28.2 28.5 28.1 28.4
Combined ratio 97.5 137.3 95.8 113.6
International:
Loss and loss adjustment
expense ratio 75.1 119.1 77.2 91.6
Underwriting expense ratio 23.6 26.7 23.8 26.0
Combined ratio 98.7 145.8 101.0 117.6
TRH reported no significant catastrophe losses in the third quarter and
first nine months of 2002. The loss and loss adjustment expense ratios, which
represent net losses and loss adjustment expenses divided by net premiums
earned, and the combined ratios for each of the third quarter and first nine
months of 2001 include the impact of pre-tax catastrophe losses amounting to
$200 million related to the third quarter 2001 terrorist attacks (Domestic: $100
million; International: $100 million (primarily incurred through the London
market)) and $215 million primarily related to the terrorist attacks (Domestic:
$115 million; International: $100 million), respectively. For the third quarter
of 2001, significant catastrophe losses added 41.7 to each of the loss and loss
adjustment expense ratio and combined ratio for consolidated TRH, and 37.7 and
46.8 to each of such ratios for its domestic and international operations,
respectively. For the first nine months of 2001, significant catastrophe losses
added 16.0 to each of the loss and loss adjustment expense ratio and combined
ratio for consolidated TRH, and 16.2 and 15.6 to each of such ratios for its
domestic and international operations, respectively. The loss and loss
adjustment expense ratios improved during the third quarter and first nine
months of 2002 compared to the comparable year ago periods principally as a
result of the abovementioned catastrophe losses.
With respect to ceded incurred losses, the 2001 amounts for the third
quarter and nine month periods are significantly higher than comparable 2002
amounts due largely to ceded losses in the 2001 periods related to the terrorist
attacks.
- 12 -
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION - CONT'D
SEPTEMBER 30, 2002
While TRH believes that it has taken appropriate steps to control its
exposure to possible future catastrophe losses, the occurrence of one or more
catastrophic events of unanticipated frequency or severity, such as a terrorist
attack, earthquake or hurricane, that causes insured losses could have a
material adverse effect on TRH's results of operations, liquidity or financial
position. Current techniques and models may not accurately predict the
probability of catastrophic events in the future and the extent of the resulting
losses. Moreover, one or more catastrophe losses could weaken TRH's
retrocessionnaires and result in an inability of TRH to collect reinsurance
recoverables.
The underwriting expense ratio for consolidated TRH, which represents the
sum of net commissions and other operating expenses divided by net premiums
written, decreased in the 2002 third quarter compared to the year ago quarter as
the acquisition cost component decreased by 1.1 and the other operating expense
component declined by 0.5. For the comparable nine month periods, the
underwriting expense ratio in 2002 declined compared to 2001 as the acquisition
cost component decreased by 0.6 and the operating expense component decreased by
0.5. With respect to the acquisition cost component, the decreases between
periods are generally due to a slight change in the mix of business between
periods. With respect to the operating expense component, the decreases between
the periods are due to the fact that the rates of increase in operating expenses
are being significantly exceeded by the rates of increase of net premiums
written for the respective periods.
For a discussion of underwriting results by segment see SEGMENT RESULTS
below.
Income before income taxes increased to $76.5 million in the third quarter
of 2002 versus a loss before income taxes of ($136.4) million in the third
quarter of 2001. The increase to income before income taxes in the 2002 third
quarter versus the loss before income taxes in the comparable 2001 quarter
resulted from improved underwriting results in 2002, due largely to the absence
of significant catastrophe losses in the 2002 period and a reduction in the
underwriting expense ratio, and increased net investment income. Excluding
pre-tax catastrophe losses and net realized capital gains, third quarter 2002
income before income taxes would have increased 22.6 percent to $74.6 million
from $60.9 million reported in the comparable prior year period. For the nine
month periods, income before income taxes increased to $220.7 million in 2002
versus a loss before income taxes of ($25.2) million in 2001. The increase to
income before income taxes in the first nine months of 2002 versus the loss
before income taxes in the same prior year period resulted from improved
underwriting results in 2002, including the absence of significant catastrophe
losses in the 2002 period and a reduction in the underwriting expense ratio, and
increased net investment income in the 2002 period. Excluding pre-tax
catastrophe losses and net realized capital gains, income before income taxes
for the first nine months of 2002 would have totaled $220.3 million versus
$182.0 million in the comparable prior year period, an increase of 21.0 percent.
Income tax expenses of $15.3 million, representing an effective tax rate of
19.9 percent, and $45.0 million, with an effective tax rate of 20.4 percent,
were recorded for the three and nine month periods ending September 30, 2002,
respectively, compared to income tax benefits of ($58.6) million, with an
effective tax rate of 42.9 percent, and ($37.6) million, with an effective tax
rate of 149.4 percent, for the comparable year ago periods. As losses from the
2001 terrorist attacks were considered an unusual item, the full tax benefit
resulting from those charges, or $70 million, was reflected in each of the three
month and nine month periods ending September 30, 2001. The impact on the
effective tax rate and nature of components in a reconciliation of the federal
income tax statutory rate of 35 percent to the respective effective tax rates in
the 2002 periods are generally similar to the two years prior to 2001 (see Note
4 of Notes to Consolidated Financial Statements contained in Transatlantic
Holdings, Inc. Form 10-K for the year ended December 31, 2001). The tax benefit
related to the cost of the terrorist attacks in 2001 primarily accounts for the
significantly different percentage relationship between income tax expense
(benefit) and income (loss) before income taxes in comparing the third quarter
and first nine months of 2002 to the same 2001 periods. (See Note 6 of Notes to
Condensed Consolidated Financial Statements.)
- 13 -
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION - CONT'D
SEPTEMBER 30, 2002
Net income for the third quarter of 2002 increased to $61.3 million, or
$1.16 per common share (diluted), compared to a net loss of ($77.8) million, or
($1.49) per common share (diluted), in the 2001 third quarter. Net income (loss)
includes after-tax net realized capital gains of $1.2 million and $1.8 million
in the third quarters of 2002 and 2001, respectively. Net loss for the third
quarter of 2001 also includes after-tax catastrophe losses of $130 million
related to the terrorist attacks. Third quarter 2002 income excluding after-tax
net realized capital gains and significant catastrophe losses increased 19.1
percent to $60.0 million, or $1.14 per common share (diluted), compared to $50.4
million, or $0.96 per common share (diluted), in the year ago quarter.
Net income for the first nine months of 2002 increased to $175.7 million,
or $3.33 per common share (diluted), compared to $12.4 million, or $0.24 per
common share (diluted), in the same prior year period. Net income includes
after-tax net realized capital gains of $0.2 million and $5.1 million for the
first nine months of 2002 and 2001, respectively. Net income for the first nine
months of 2001 also includes after-tax catastrophe losses of $141 million, which
includes $130 million related to the third quarter 2001 terrorist attacks. For
the first nine months of 2002, income excluding after-tax net realized capital
gains and significant catastrophe losses totaled $175.5 million, or $3.32 per
common share (diluted), compared to $148.4 million, or $2.82 per common share
(diluted), in the first nine months of 2001, an increase of 18.2 percent.
Reasons for the increases in net income between periods are as discussed
above.
In the third quarter of 2002, the Board of Directors of Transatlantic
Holdings, Inc. declared a dividend of $0.10 per common share to stockholders of
record as of November 29, 2002, payable on December 13, 2002.
SEGMENT RESULTS
Domestic - Comparing each of the three and nine month periods ending
September 30, 2002 with the same prior year periods, domestic revenues increased
over the prior year due primarily to increases in net premiums earned, as
discussed earlier in the OPERATIONAL REVIEW. Domestic operations reported income
before income taxes for the three month period ending September 30, 2002
compared to loss before income taxes for the same prior year period, and
reported higher income before income taxes for the first nine months of 2002
compared to the same prior year period due, in each case, principally to reduced
loss activity which was reflected in improved underwriting results. The reduced
loss activity resulted primarily from the absence of significant catastrophe
losses in 2002 compared to pre-tax catastrophe losses of $100 million and $115
million in the third quarter and first nine months of 2001, respectively.
International - Europe (London and Paris branches and Trans Re Zurich) -
Comparing the results for each of the three and nine month periods ending
September 30, 2002 with the same prior year periods, European revenues increased
compared to the prior year primarily due to increases in net premiums earned in
London and, with respect to the nine-month period only, Trans Re Zurich. These
increases generally occurred in automobile liability and property lines. In each
of the third quarter and first nine months of 2002, TRH reported income before
income taxes compared to loss before income taxes in the same prior year periods
due primarily to improved underwriting results and increased net investment
income. Underwriting results improved in 2002 third quarter and first nine
months compared to the same prior year periods due principally to the absence of
significant catastrophe losses in the 2002 periods compared to pre-tax
catastrophe losses of $100 million in the third quarter and first nine months of
2001 related to terrorist attacks, offset in small part, by a slight
deterioration of other loss experience in the 2002 periods.
- 14 -
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION - CONT'D
SEPTEMBER 30, 2002
International - Other (Miami (serving Latin America and the Caribbean),
Toronto, Hong Kong and Tokyo branches) - Comparing the results of each of the
three and nine month periods ending September 30, 2002 with the same prior year
periods, International-Other revenues increased compared to the prior year
periods due, in large part, to increases in net premiums earned in Miami and
Toronto in the 2002 periods versus comparable 2001 periods. Income (loss) before
income taxes for the third quarter and first nine months of 2002 increased
compared to the year ago periods due principally to improved underwriting
results caused, in large part, by reduced commissions and other operating
expenses as a percentage of net premiums written (i.e., lower underwriting
expense ratio).
FINANCIAL CONDITION AND LIQUIDITY. The increase in cash and invested assets at
September 30, 2002 compared to December 31, 2001 was due, in large part, to
positive cash flow from operations during the first nine months of 2002, an
increase in the payable at quarter-end for securities in course of settlement
and, to a lesser extent, the foreign exchange impact of a generally weakening
U.S. dollar this year through September 2002, when compared principally to the
primary European currencies in which TRH holds investments, offset, in part, by
funds disbursed under securities loan agreements. With respect to the components
of investments and cash, the carrying value of common stocks available for sale
has declined largely due to unrealized depreciation on such investments caused
principally by weakness in the equity markets. In addition, other invested
assets grew significantly, principally as a result of an increase in the balance
of the limited duration bond fund by $316 million. (See Note 8 of Notes to
Condensed Consolidated Financial Statements.) The duration of the fixed maturity
available for sale portfolio was 4.9 years as of September 30, 2002.
Stockholders' equity totaled $2,040.5 million at September 30, 2002, a net
increase of $194.5 million from year-end 2001. The increase in stockholders'
equity during 2002 is primarily composed of net income of $175.7 million and an
increase in accumulated other comprehensive income of $32.4 million (See
Consolidated Statements of Comprehensive Income (Loss)), offset, in part, by
dividends declared of $15.5 million.
The abovementioned increase in accumulated other comprehensive income
consisted of net unrealized appreciation of investments, net of income taxes, of
$21.2 million and a net unrealized currency translation gain, net of income
taxes, of $11.2 million. The net unrealized appreciation of investments is
composed principally of an increase of $77.2 million from unrealized
appreciation of fixed maturities available for sale, reflecting a continued
decline of market interest rates during the year, partially offset by a decrease
of $56.1 million from unrealized depreciation of equities, due to weakness in
the equity markets.
Market values of invested assets may fluctuate due to changes in general
economic and political conditions, market interest rates, prospects of investee
companies and related investments and other factors.
Operating cash flow for the first nine months of 2002 was $435.7 million,
an increase of $268.2 million over the same 2001 period. This increase was
caused largely by increased net premiums written, net of commissions, increased
reinsurance recoveries and a reduction in tax payments in the 2002 period
compared to the 2001 period, offset, in part, by increased losses paid. The
increase in paid losses is generally due to an increase in premium volume and
the continued shift in the business mix towards lines with shorter payment
patterns. Management believes that the liquidity of TRH has not materially
changed since the end of 2001.
If paid losses accelerated significantly beyond TRH's ability to fund such
paid losses from current operating cash flows, TRH would be compelled to
liquidate a portion of its investment portfolio and/or arrange for financing.
Such events that may cause such a liquidity strain could be the result of
several catastrophic events occurring in a relatively short period of time.
Additional strain on liquidity could occur if the investments sold to fund such
paid losses were sold in a depressed marketplace and/or reinsurance recoverable
on such paid losses became uncollectible.
- 15 -
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION - CONT'D
SEPTEMBER 30, 2002
TRH's operations are exposed to market risk. Market risk is the risk of
loss of fair market value resulting from adverse fluctuations in interest rates,
equity prices and foreign currency exchange rates. See Part I Item 3 of this
Form 10-Q for a discussion of market risk.
CRITICAL ACCOUNTING POLICIES
TRH considers among its most important accounting policies those policies
with respect to reserves for losses and loss adjustment expenses and deferred
acquisition costs. These are the policies that require management's most
significant exercise of judgment on both a quantitative and qualitative basis.
See further discussion in Management's Discussion and Analysis of Financial
Condition and Results of Operations and in the Notes to Consolidated Financial
Statements in the Transatlantic Holdings, Inc. Form 10-K for the year ended
December 31, 2001.
ACCOUNTING STANDARD. Adoption of Statement of Financial Accounting Standards
(SFAS) No. 133 and Change in Classification of Certain Fixed Maturities: SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities," issued
by the Financial Accounting Standards Board (FASB) in June 1998, as amended,
established accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. In accordance with the standard, TRH adopted its provisions
on January 1, 2001 with no resulting effect on net income or cash flows.
In accordance with the transition provisions of SFAS No. 133, as amended,
TRH transferred during the first quarter of 2001 all of its fixed maturities in
the held-to-maturity classification (with an amortized cost of $932.3 million
and market value of $982.1 million at the date of transfer) to the fixed
maturities available-for-sale classification (on the balance sheet) to enhance
TRH's flexibility with respect to future portfolio management. The resulting
increase in unrealized appreciation of investments, net of income taxes (a
component of accumulated other comprehensive income), of $32.4 million (net of a
tax effect of $17.4 million) has been recorded as the cumulative effect of an
accounting change in the Consolidated Statement of Comprehensive Income for the
nine months ended September 30, 2001. Under the provisions of SFAS No. 133, such
a transfer does not affect TRH's intent nor its ability to hold fixed maturities
acquired in the future to their maturity.
- 16 -
Part I - Item 3
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Transatlantic Holdings, Inc. and its subsidiaries (collectively, TRH)
operations are exposed to market risk. Market risk is the risk of loss of fair
market value resulting from adverse fluctuations in interest rates, equity
prices and foreign currency exchange rates.
Measuring potential losses in fair values is a major focus of risk
management efforts by many companies. Such measurements are performed through
the application of various statistical techniques. One such technique is Value
at Risk (VaR). VaR is a summary statistical measure that uses changes in
historical interest rates, equity prices and foreign currency exchange rates to
calculate the maximum loss that could occur over a defined period of time given
a certain probability.
TRH believes that statistical models alone do not provide a reliable method
of monitoring and controlling market risk. While VaR models are relatively
sophisticated, the quantitative market risk information generated is limited by
the assumptions and parameters established in creating the related models.
Therefore, such models are tools and do not substitute for the experience or
judgment of senior management.
TRH has performed VaR analyses to estimate the maximum potential loss of
fair value for financial instruments for each type of market risk. In this
analysis, financial instrument assets include all investments and cash and
accrued investment income. Financial instrument liabilities include unpaid
losses and loss adjustment expenses and unearned premiums, each net of
reinsurance. TRH has calculated the VaR for the first nine months of 2002 and
for the year ended December 31, 2001 using historical simulation. The historical
simulation methodology entails re-pricing all assets and liabilities under
explicit changes in market rates within a specific historical time period. In
this case, the most recent three years of historical market information for
interest rates, equity index prices and foreign currency exchange rates are used
to construct the historical scenarios. For each scenario, each transaction is
re-priced. Consolidated totals are calculated by netting the values of all the
underlying assets and liabilities. The final VaR number represents the maximum
potential loss incurred with 95 percent confidence (i.e., only 5 percent of
historical scenarios show losses greater than the VaR figure). A one-month
holding period is assumed in computing the VaR figure.
The following table presents the VaR on a combined basis and of each
component of market risk for the nine months ended September 30, 2002 and for
the year ended December 31, 2001. VaR with respect to combined operations cannot
be derived by aggregating the individual risk amounts presented herein:
Market Risk
- -----------
(in millions)
2002 2001
---------------------------------------------- ---------------------------------------------
As of As of
September 30, Average High Low December 31, Average High Low
---------------------------------------------- ---------------------------------------------
Combined $96 $107 $118 $ 96 $111 $96 $111 $ 80
Interest rate 98 104 113 98 99 82 99 66
Equity 45 51 55 45 55 53 55 51
Currency 2 2 3 2 3 3 4 3
- 17 -
Part I - Item 4
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONTROLS AND PROCEDURES
Our disclosure controls and procedures are designed to ensure that
information required to be disclosed in reports that we file or submit under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the Securities and
Exchange Commission. The Chief Executive Officer and the Chief Financial Officer
have reviewed the effectiveness of our disclosure controls and procedures within
the last ninety days and have concluded that the disclosure controls and
procedures are effective. There were no significant changes in our internal
controls or in other factors that could significantly affect these controls
subsequent to the last day they were evaluated by our Chief Executive Officer
and Chief Financial Officer.
- 18 -
Part II - Item 6. Exhibits and Reports on Form 8-K
(a) There are no exhibits included with this filing.
(b) In a Current Report on Form 8-K filed on August 9, 2002,
Transatlantic Holdings, Inc. disclosed that pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, each of the principal executive officer and
principal financial officer have furnished certifications of the
Quarterly Report of Transatlantic Holdings, Inc. (TRH) on Form
10-Q for the quarter ended June 30, 2002, which certifications
were attached to the transmittal letter accompanying such filing.
The transmittal letter with attachments was submitted to and the
abovementioned Form 10-Q was filed with the Securities and
Exchange Commission on August 9, 2002. In addition, although not
required by the Securities and Exchange Commission Order No.
4-460, the principal executive officer and the principal
financial officer of TRH voluntarily furnished sworn statements
in the format prescribed in the Commission's Order.
Omitted from this Part II are items which are inapplicable or to which the
answer is negative for the period covered.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRANSATLANTIC HOLDINGS, INC.
----------------------------------------
(Registrant)
/s/ STEVEN S. SKALICKY
----------------------------------------
Steven S. Skalicky
On behalf of the registrant and in his capacity as
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Dated November 13, 2002
- 19 -
CERTIFICATIONS PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
CERTIFICATION
I, Robert F. Orlich, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Transatlantic
Holdings, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 13, 2002
/s/ ROBERT F. ORLICH
- --------------------
Robert F. Orlich
President and Chief Executive Officer
- 20 -
CERTIFICATION
I, Steven S. Skalicky, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Transatlantic
Holdings, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 13, 2002
/s/ STEVEN S. SKALICKY
- ----------------------
Steven S. Skalicky
Executive Vice President and Chief Financial Officer
- 21 -